Supreme Court: A majority shareholder cannot be an employee

“Employing a majority shareholder is considered not to be an employment relationship when the other shareholders’ equity is so small that it essentially has no impact, i.e. their stake does not exceed a few per cent. Because there is such a disproportionate majority holding leading to the concentration of voting power and the way this is used, employment relationships in a multi-member limited company should be treated on an equal footing with a single-member company. The legal structure of a single-member company has no equivalent in the Labour Code because relationships under such a structure would lack the essential components of an employment relationship prescribed by the labour law.” The Supreme Court judgment of 13 December 2022, I USKP 144/21.

The case in question was based not on labour law but on social insurance law. It considered an insured person employed under an employment contract as the chair of a one-member board in a limited company, while at the same time holding more than 95% of the shares. Because of that, the insured person would be considered self-employed and not an employee for the purposes of social insurance. This, in turn, affects the amount of sickness and maternity benefits. A few things do not add up here, such as the fact that the insured person was not the sole shareholder in the limited company and, therefore, was not even insured as self-employed. Arguably, the Social Insurance Institution acted quite generously by not questioning this insurance title. The issue of shareholder employment in a limited liability company has been the subject of disputes for years – attorney-at-law Łukasz Chruściel comments for Rzeczpospolita.

Article here.